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These Are The ‘Most’ & ‘Least’ Friendly States For Small Business

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Utah is the friendliest state for small businesses while Rhode Island is the least friendly, according to the second annual Small Business Friendliness Survey by Thumbtack and the Ewing Marion Kauffman Foundation.

States ranked A+ through F.

“Small businesses are top-of-mind for lawmakers nationwide, but too often their needs are more a matter of conjecture rather than actual evidence,” said Thumbtack.com co-founder Sander Daniels.

“Some 7,000 businesses owners across the country have told us that they care about a lot more than just taxes – for most businesses, simple licensing regulations and helpful training programs are even more important to their success,” he adds.

The study is based on responses small business owners gave to questions regarding demographics and the health of their businesses, the survey’s methodology explains.

The following are just a few of the categories survey respondents were asked to rank:

Overall small business friendliness

Ease of starting a small business

Cost of hiring a new employee

Overall regulatory friendliness

North and South Dakota, Wyoming, Montana, West Virginia, Alaska, Mississippi, Vermont, and Delaware were excluded from the study due to non-responses.

Here are the top five friendliest states for small businesses:

5. Texas

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Best: Employment, labor, and hiring. A+

Worst: Training and networking programs. A-

4. Idaho

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Best: Ease of starting a business. A+

Worst: Zoning. A-

3. New Hampshire

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Best: Ease of starting a business. A+

Worst: Training and networking programs. B

2. Alabama

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Best: Ease of hiring. A+

Worst: Training and networking programs. A-

1. Utah

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Best: Overall friendliness. A+

Worst: Ease of hiring. B

Here are the top five least friendly states for small businesses:

5. Illinois

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Best: Health and safety. B

Worst: Overall friendliness. D

4. California

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Best: Training and networking programs. C+

Worst: Tax code. F

3. Hawaii

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Best: Environmental. D

Worst: Tax code. F

2. Maine

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Best: Health and safety. A+

Worst: Overall friendlessness. F

1. Rhode Island

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Best: Training and networking. C

Worst: Licensing. F

And here are some of the report’s key findings:

Professional licensing requirements were 30 percent more important than taxes in determining a state’s overall business-friendliness, confirming the findings from last year’s study. Furthermore, this year’s research revealed that 40 percent of U.S. small businesses are subject to licensing regulations by multiple jurisdictions or levels of government.

Utah was the top rated state, and Austin, TX was the top rated city. At the other end of the spectrum, Rhode Island and Newark, NJ were the lowest rated state and city.

The ease of obtaining health insurance was an important factor for many businesses. One-third of small business owners rated obtaining and keeping health insurance as “Very Difficult,” versus only 6 percent who rated it “Very Easy.”

Small businesses were relatively unconcerned with tax rates – more than half of small business owners felt they pay about the right share of taxes.

“It is critical to the economic health of every city and state to create an entrepreneur-friendly environment,” said director of Research and Policy at the Kauffman Foundation Dane Stangler.

“Policymakers put themselves in the best position to encourage sustainable growth and long-term prosperity by listening to the voices of small business owners themselves,” he adds.

Final Thought: Texas ranks among the top five friendliest states for small businesses and is home to three of the top five small business-friendly cities (Austin, Houston, and San Antonio).

In contrast, California ranks among the bottom five least-friendly states and is home to three of the five least-friendly cities for small businesses (Los Angeles, San Diego, and Sacramento).